I know I have a lot of readers from the EDA industry. Once a hotbed of innovation, entrepreneurship, and wealth creation, it is an industry that is now moribund. VCs and angel investors have all but abandoned the industry, and those private companies that exist find it difficult to create lucrative exits, a phenomenon that further turns off investors.
This post, however, is a look at the opportunities that exist within this ecosystem and against this general backdrop.
The fundamental problem with EDA is that the product opportunities have very small TAMs (total available markets) which do not really fit the venture model. Even with $50 million–$100 million TAM business opportunities, venture capital is just not the right way to finance these businesses. Angel capital is okay as long as the exit market is active enough to provide liquidity. However, that has not been the case of late, so the funnel has simply choked up.
But, EDA, like certain other segments of the technology industry (security comes to mind as one with a similar pattern), is full of niche innovation opportunities that the big companies are ignoring, but customers have interest in. And that, to me, is where today’s EDA entrepreneurs can play a very interesting role.
No, not by seeking financing to address these opportunities. Forget the investors.
You need to go about the problem a different way: (a) You need to bootstrap (b) You need to bootstrap using services.
You see, in Innovation, Need of the Hour, my most recent book in the Entrepreneur Journeys series, I have discussed the bottlenecks to innovation at length. I have also offered work-arounds to circumvent these bottlenecks, as well as case-studies of how people have done it. True, they have done this in other industries. And I submit that you guys can do it in EDA. Read the book, and you will find significant pointers.
The technologists in EDA are some of the absolute best I know. And yet, you constantly feel frustrated and envious of those in other industries – most notably, the Internet – because they create wealth easily, and by creating much bigger businesses by applying much less technical prowess.
Why is that?
The simple reason is that they have access to larger markets, whereas the EDA industry is tiny in comparison.
But even this tiny industry of $3 billion–$4 billion still has room for you to launch at least fifty startups that will become $5 million–$10 million companies. Now, if you, the entrepreneur, own this company 100%, then every year, you will be bringing in $5 million–$10 million in revenue, a good profit margin, hopefully, and have a long-term, highly cash-rich scenario.
Some of you may even build up a $50 million business and again, if you own 100% of it, you call the shots, tell me what’s wrong with this scenario?
Maybe an exit will come, but even if it doesn’t, you can enjoy the cash-rich situation, and afford a great lifestyle.
I call these Built To Enjoy businesses.
I invite a few hundred EDA entrepreneurs to join the 1M/1M program, and I will work with you such that you can put some innovation and entrepreneurship back into the EDA industry.
And in doing so, I promise, you will create wealth for yourselves.